1. This is an appeal to the Tribunal against Order No.203(22)80/Collector/16/83 dated 11-2-83 of the Collector of Central Excise, Calcutta. In this order the Collector had held that the PVC Conveyor Belting manufactured by the appellants was chargeable to Central Excise duty under Item 22(3) of the Central Excise Tariff.
Consequently, he had demanded duty amounting to Rs. 14,70,858.01. He had also imposed on the appellants a penalty of Rs. 5 lakhs for contravention of various rules of the Central Excise Rules, 1944.
2. In dealing with this appeal, it is relevant to take note of certain other decisions, some by the Collector of Central Excise (Appeals), Calcutta, and some by the Tribunal itself. The decisions of the Collector (Appeals) are contained in the combined order No. B.621/622/CAL/82 dated 20-8-82, passed on two appeals of the present appellants on the same question, namely Central Excise Tariff classification of the conveyor belting manufactured by them. The Collector (Appeals) had held that the goods were classifiable under Item 68 and not under Item 22 of the Central Excise Tariff, and had accordingly allowed the two appeals. Against these orders of the Collector (Appeals), the Collector of Central Excise, Calcutta had filed two appeals to the Tribunal. These are being deait with by us in a separate order.
3. The Tribunal itself had occasion to pass two earlier orders which have a bearing on this case. The first was the Order No. 286-D/1983 in the case of M/s International Conveyors Ltd., Aurangabad. In that case the Bench, by a majority, held that the conveyor belting which was the subject matter of that appeal was classifiable under Item 68 of the Central Excise Tariff and not under Item 19 as "Cotton Fabrics" as held by the lower authorities. One learned Member of that Bench, however, had recorded his dissent from the majority judgement, and he expressed the view that the conveyor belting in question would fall under sub-item No. III of Item No. 19 of the Central Excise Tariff.
4. In a subsequent order, relating to six appeals filed by the same appellants, namely M/s International Conveyors Ltd., Aurangabad, a Special Bench of the Tribunal (having the same composition as the present Bench) had to consider the classification of "PVC Fire Resistant Antistatic Solid Woven Conveyor Belting". The Bench noted that the six orders before it were based on a decision contained in an Order-in-Appeal dated 23-10-80 of the Appellate Collector of Central Excise, Bombay, which order had been over-ruled by its predecessor Bench in the majority judgment referred to earlier. The Bench recorded that it had very carefully considered both the views expressed in that order and that it was in agreement with the view expressed by the majority, namely that the goods under consideration were classifiable under Item 68 of the Central Excise Tariff Schedule. Since the very same issue has been exhaustively discussed in the earlier order, and the Bench was in agreement with the reasoning expressed in that order by the majority, it did not discuss the issue again in detail, but, following the earlier order, allowed all the six appeals before it, on the basis that the classification should have been under Item 68 of the Central Excise Tariff. In the present case the goods have been described in the order (original) No. 50/80 dated 14-10-80 (which was the subject matter of an appeal to the Collector (Appeals), who allowed the appeal in his order to which reference has made in para 2 above) as "PVC Mining Conveyor Belting (Anti-Static+Fire Resistant)". The description of the goods, as reported by the Chemical Examiner, Custom House, Calcutta, and as reproduced in the show cause notice dated 16-7-80 issued by the Assistant Collector, was as follows : - "The sample is in the form of cut-piece of black coloured Belting of width 10 Cms and thickness 9 mm. It is composed of synthetic resin of P.V.C. type, reinforced with textile fabric containing 42.3% by weight of cotton and rest viscose (man-made filament yarns of cellulosic origin).
It was agreed by the learned Senior Departmental Representative in the hearing before us that there was no difference between the goods which are the subject matter of present appeals and those which are the subject matter of the two appeals filed by the Collector of Central Excise, Calcutta. Accordingly, the above descriptions can be taken as applicable to the goods under consideration.
5. Appearing before us for the appellants, namely M/s Multiple Fabric Co. Ltd., Shri R.N. Banerjee, their learned Counsel, placed heavy reliance on the previous orders of the Tribunal to which reference has been made in paras 3 and 4 above. He made the following main points :- (1) The Department had gone purely by the report of the Chemical Examiner based on the composition of the goods, and not by the trade terminology ; (2) Even according to composition, PVC was predominant in the goods, comprising 56.7%. The goods could not therefore be treated as man-made fabrics falling under Item 22 ; (3) It was important to consider how the goods were known to the trade. "Fire Resistant Conveyor Belting was recognised as a particular commodity covered by the Indian Standard Specification and was never known in the trade as Art Silk Fabric" ; (4) This was not a case of a "carcass" of textile fabric being covered with plastic to form the belting. On the other hand, the application of PVC compound was done simultaneously with the weaving of the fabric. In any event it was not the base fabric if any which was to be classified, but the final product, namely the conveyor belting. This was also made clear in the order of the Collector which inter alia contains the specific description and composition of the conveyor belting as set out in the report of the Chemical Examiner which has been referred to in para 4 above.
6. Shri Banerjee stressed that the discussion contained in the majority order in the case of M/s International Conveyors Ltd. was fully applicable to their product. In para 45 of that order reference has been made to the Gujarat High Court judgment in the case of Hind Engineering Company Rajkot (1973 STC 31 Page 115). In that case it had been held that even if it is to be assumed that canvas is comprehended within the meaning of "cotton fabrics" the process of superimposition of rubber brings about such a basic change in its character, nature and form that it loses its identity and is converted into an altogether different commercial commodity, which could not be said to fall within the meaning and expression of "cotton fabrics". In para 49 of the majority judgment it had further been emphasised that it would have been a different matter if the base fabric only had been excised on the ground that it was a product excisable under Item 19, but what had been assessed was conveyor belting as such and the Bench (majority) did not find such an item anywhere in the tariff entry (No. 19).
7. Shri Banerjee submitted that the base fabric in the International Conveyors case was of cotton (which was why the Central Excise authorities had held it to be assessable under Item 19) whereas in the persent case it was cotton and viscose (that is, man-made filment yarn), with the latter predominating. This was why the lower authorities in this case had held it to be classifiable under Item 22.
He stressed that the wording of Item 19 was materially similar to that of Item 22, with the difference that the former item dealt with cotton fabrics and the latter item with man-made fabrics. The reasoning adopted in the majority judgment for ruling out Item 19 in the case before it would therefore be equally applicable for the purpose of ruling out Item 22 in the case before us. He therefore submitted that we should hold that the goods under consideration were correctly classifiable under Item 68 of the Central Excise Tariff and consequently allow the appeal.
8. For the Department, Shri Tayal, the learned SDR, relied heavily on the reasoning adopted in the minority judgment in the case of M/s International Conveyers Ltd. So far as the process of manufacture was concerned, he referred to what had been stated in this regard in the order of the Collector. The appellants themselves had stated that the application of PVC compound was done simultaneously with the weaving of the fabric. This would show that the goods under consideration were the result of a process of weaving and should therefore be considered as a fabric. (Against this it was submitted by the appellants that the description of the process of manufacture as set out in the Collector's order was incomplete. They read out from their memorandum of appeal to the Collector (Appeals) in the parallel cases, to show that the "carcass" made of yarn dipped, soaked and saturated with liquid PVC mix or solution is thereafter subject to a process of "gelling" to ensure that the liquid PVC is set into the carcass, and that thereafter the carcass is fed into a coating chamber for coating).
9. Shri Tayal also submitted that the present case could be distinguished from that of M/s International Conveyors Ltd. In that case the composition of the goods, as shown in para 18 of the majority judgment, 21% cotton, 60% PVC and 19% balance including nylon yarn.
Therefore in that case the content of PVC in the belting come to 60%.
In the present case, according to the Chemical Examiner's report, the belting contained 42.3% cotton and the rest viscose. According to him, in the present case it was the percentage of textile material which predominated in the goods and not the percentage of PVC compound.
10. At this stage we have to point out that some confusion seems to have arisen as a result of the different percentages mentioned in the Chemical Examiner's report, which has been reproduced in para 4 above.
According to our understanding, the report clearly means that the conveyor belting contained 56.7% of PVC compound and 43.3% of textile fabric. Out of this 43.3% of textile fabric, 42.3% (or 18.3% of the belting) consisted of cotton fibre, and the remaining 57.7% (that is, 25.0% of the belting) consisted of viscose filament yarn. We do not read the Chemical Examiner's report to mean that the cotton fibre constituted 42.3% of the total weight of the belting, which would mean that the viscose filament yarn constituted only one per cent by weight of the belting. Apart from the straight reading of the report, it seems inconceivable that the Central Excise authorities would have sought to classify the belting as a man-made fabric on the basis of its containing only one per cent of man-made filament yarn. Incidentally, Shri Tayal pointed out that in the appellants' reply dated 17-12-80 to the show cause notice issued by the Collector, they had stated that the percentages of the different constituents in their belting were as follows : - Shri Tayal pointed out that the reference to nylon was contradictory to the Chemical Examiner's report according to which the man-made fibre was viscose filament yarn. Shri Banerjee did not explain the reason for this discrepancy. Although it has not been satisfactorily explained, we do not find that it is material to a decision on the case which has to be based on the Chemical Examiner's report.
11. Shri Tayal also referred to a judgment of the Calcutta High Court in the case of Saifuddin Ibrahim v. Assistant Commissioner of Sales Tax, reported in Sales Tax Cases Volume 38 Page 463 of 1976. He explained that in the relevent Sales Tax legislation the definition of cotton fabrics under Item 19 of the Central Excise Tariff had been made applicable. The question having been raised whether rubberized cotton fabrics should be held as covered by the expression'"cotton fabrics", it had been held in that case that rubberised cotton fabrics were covered by the definition of 'cotton fabrics". Shri Tayal fairly mentioned that the case was under appeal. Whatever the exact position might be, we do not think the decision on rubberised cotton fabrics would help in considering the classification of conveyor belting, having regard to the widely different nature of the two articles.
Whereas the rubberised cotton fabrics were not only referred to as "fabrics", but are also used for the purpose for which fabrics are normally used, that is, covering the person or an article of furniture, the use of conveyor belting is quite different. In fact, the most important question before us is whether conveyor belting can at all be termed as a "fabric" and for this purpose the decision on rubberized cotton fabric is not of relevance.
12. Shri Tayal also relied on the decision of the Supreme Court in the case of Dunlop India Ltd., and Madras Rubber Factory Ltd. v. Union of India and Ors., reported in AIR 1977 SC 597. He cited para 36 of that judgment in which it has been held that "Once an article is classified and put under a distinct entry, the basis of the classification is not open to question". We can straightaway dispose of this argument because in a sense it begs the question at issue. If the tariff item had in terms referred to "conveyor belting", the abovementioned observation of the Supreme Court would have been squarely applicable. However, the tariff item does not specify "conveyor belting" and the entire question before us is whether the expression "cotton fabrics" or "man-made fabrics" covers conveyor belting.
13. Shri Tayal also pointed put that under Item 22(3), the rate of duty is expressed as the "duty for the time being leviable on the base fabrics, if not already paid, plus thirty percent ad valorem".
According to him, this made it clear that the nature of the base fabric was material for the purposes of the classification of the final product.
14. Referring to the dissenting order of one learned Member in the first International Conveyors case, Shri Tayal submitted that it contained authorities to show that the term "fabrics" would cover conveyor belting. One such authority was a reference in "The New Encyclopaedia of Textiles" published by the Editors of American Fabrics and Fashions Magazine. In this publication, which should be considered as an authoritative indication of the understanding of trade, commerce and industry, conveyor belting had been included under the section headed "Industrial Fabrics" (vide pages 502 to 503 thereof). Again, in ISI Specification No. 2364-1979, although belting was not specifically mentioned, there were definitions of "Impregnated fabrics" and "Industrial fabrics" and the meanings assigned to them were as follows :- "Impregnated Fabrics.-Fabrics whose interstices in the yarn have been filled with chemical compound so as to cover the entire surface. Commonly used for leather bags, garments, insulation tapes, etc.
Industrial Fabrics.-Fabrics made from man-made or natural yarn which are commonly used on machines such as belting duck, filter cloth, sizing flannel, etc." Shri Tayal submitted that conveyor belting would fall within the ambit of "impregnated fabrics" as defined in the above Indian Standard Specification.
15. Finally, Shri Tayal stated that he relied on the judgment of the Supreme Court in the case of Delhi Cloth and General Mills Co. Ltd. v.State of Rajasthan and Ors. (1980 E.L.T. 383 SC), This case was also referred to by the learned Member who recorded the dissenting judgment.
The goods under consideration in that case were tyre cord fabric. The question before the Supreme Court was whether the tyre cord fabric fell under Item 22 of the Central Excise Tariff as "Rayon or Artificial Silk Fabric", and the Supreme Court held that it did. The learned Member had expressed the view that the same reasoning which prevailed with the Supreme Court in regard to tyre cord fabric would be applicable to conveyor belting and would lead to the conclusion that it should be regarded as a man-made fabric. Shri Tayal relied on these observations of the learned Member.
16. In the result, Shri Tayal submitted that the finding of the Collector that the conveyor belting under consideration was classifiable under Item 22(3) of the Central Excise Tariff was correct and should be upheld and the appeal rejected.
17. We have carefully considered the arguments advanced on behalf of both the parties. In the first instance, we would observe that the description of the goods in this case namely "PVC Mining Conveyor Belting (Antistatic Fire Resistant)" is almost identical to the description of the goods in the case of M/s International Conveyors Ltd., namely "PVC Fire Resistant Antistatic Solid Woven Conveyor Belting". The goods being materially the same and the question also being the same, namely their classification under the Central Excise Tariff, and there being the two previous decisions of the Tribunal holding these goods to be classifiable under Item 68, there should ordinarily have been no need for us to enter into a detailed discussion of the issue. We have, however, considered such a discussion to be desirable. This is in view of the fact that the first decision was a majority decision, with one learned Member expressing a dissenting view. The second decision was a unanimous one. However, since the matter arose out of the same order which had been the subject of the earlier decision, the merits were not discussed in detail in the second decision. Since in the present case considerable stress has been laid on the dissenting view expressed by one learned Member in the first order, we have felt it expedient to go into the merits of this case in some detail, particularly as it relates to a different appellant.
18. We have already set out the arguments advanced by the learned Counsel for the appellants. The arguments advanced by him are substantially the same as those which were accepted in the majority decision in the first order, which was endorsed in the second order. We find these grounds to have considerable force. It is particularly relevant to note that the issue under consideration is the classification of the conveyor belting as it is cleared and marketed.
The issue is not regarding the base fabric which has or might have gone into the manufacture of the final product, namely conveyor belting.
19. The most important question which has to be considered is whether the goods can at all be termed as "man-made fabrics". The description in Item 22 covering this item is quite detailed, but the important point in this context is that it begins as follows :- "Man-made fabrics" means all varieties of fabrics manufactured either wholly or partly from man-made fibres or yarn...".
Sub-item (3) of this item, which is the one specifically under consideration, reads as follows : - "Fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials".
Thus both the main description in the relevant tariff Item 22 and the description in sub-item (3) thereof speak of "man-made fabrics" or "fabrics". Therefore, unless the goods in question can be described as "fabrics"', they cannot be considered as coming within the scope of this item. In the majority decision in the case of International Conveyors, reference has been made to the judicial dicisions cited before our predecessor Bench (and repeated before this Bench) and it has been held that these decisions do not justify treating conveyor belting as cotton fabrics (which in the present case would have to read "man-made fabrics"). Since this is the most important single aspect of the matter, we shall go,'into this in some detail.
20. Reference has already been made to the judgment in the case of Dunlop India Ltd. In that case, while holding that once an article is classifiable and put under a distinct entry, the basis of the classification is not open to question, the Supreme Court had also laid down that "meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course". Thus, in the absence of any reason to the contrary, it is the ordinary trade and commercial usage which should determine whether an article is covered by a particular description in the tariff. This is a well-established proposition which has not been controverted by the respondents. In fact, they themselves have placed reliance on "The New Encyclopaedia of Textiles" to show that according to the understanding of trade and industry, conveyor belting is regarded as a fabric But what we have to consider is whether such a meaning would be given by people and trade and commerce, conversant with the subject generally and in the usual course. The words from the Supreme Court's observations which we have emphasized make it clear that the meaning must be one which is generally or usually understood. Would conveyor belting be generally or usually understood by the textile trade as being a "fabric" We do not think so. According to the Chemical Examiner's report, the sample of the goods in question was 10 cm wide and 9 mm thick. It is also clear that the belting contains as much as 56.7% of PVC compound. It appears to us that material which is 9 mm thick and would be proportionately stiff, and also contains as much as 56.7% of plastic material, would not correspond to the general or usual understanding of the word fabric. Taking the dictionary which is closest to our hand, namely Chambers Twentieth Dictionary, Revised Edition of 1976, we find a number of meanings given for the word "fabric". The only one relevant in this context is "manufactured cloth". This would conform to the general and usual understanding of fabric as a relatively thin and flexible material, usually capable of being draped or wound around the person or spread out or hung, and ordinarily used for clothing, hangings or curtain material, tablecloths, and so on. No doubt the meaning can be extended to similar material which is used for different purposes such as the tyre cord fabric which is used in industry for the manufacture of tyres. Even then the goods should still have the generally accepted characteristics of a fabric, as referred to above.
It is noteworthy that in both the judgments which were relied upon by the learned Departmental Representative, the goods were actually known as "fabric". In the case of Saifuddin Ibrahim the goods were "rubberised cotton fabrics". In the Delhi Cloth and General Mills case the goods were "tyre cord fabric". The Supreme Court in the Delhi Cloth and General Mills case had no doubt held that tyre cord fabric, should be regarded as a textile fabric. But that judgment itself shows that the goods had the characteristics of a fabric as ordinarily understood.
As mentioned in the Supreme Court judgment "it is woven fabric in which the intermediate process of weaving the weft thread across the warp cord is an integral stage of manufacture". The Supreme Court went on to point out that Item 22 of the Central Excise Tariff speaks of "all varieties of fabrics", and that the language was wide enough to include the rayon tyre cord fabric manufactured by the appellants in that case.
These observations cannot however be stretched to mean that an article which could not be termed as "fabric" as ordinarily understood could be brought within the scope of that item.
21. We now come to the authorities cited by Shri Tayal. It is correct that in "The New Encyclopaedia of Textiles", there is an item "belting" which comes within the Chapter on "Industrial Fabrics". The same publication contains a "Dictionary of Textile terms". That dictionary does not contain any definition of the term "fabrics". It does contain a definition of the term "Industrial fabrics" which reads as follows : - "INDUSTRIAL FABRICS : As differentiated from consumer textiles, these are textile products which are commonly used in the various manufacturing industries for factory purposes. Prominent in this group are such textile products as machine beltings, straps, pads and similar types of fabrics or yarns, both man-made and natural." It has been argued that since this "Encyclopaedia" is published by the Editors of American Fabrics and Fashions Magazine, it can rightly be regarde d as conveying the understanding of trade and industry.
22. While this argument is not without force, it appears to us that the Encyclopaedia, which runs to over 600 pages exclusive of the index and costs about 50 U.S. dollars, is also in a sense a technical work, in that it includes a very wide range of meanings which might not correspond to ordinary usage. This is apparent when we look at some of the other articles listed in the section on "Industrial fabrics". Thus, the section also covers "fishing nets and twine", "hose" and even "ropes". Under the last heading there is reference to polyester, nylon and polypropylene ropes. Whatever might be said in regard to some of the other items listed, it would hardly be argued that "ropes" can be classified as "man-made fabrics" on the strength of their inclusion under the heading "Industrial fabrics" in the Encyclopaedia. It is therefore apparent that the expression "industrial fabrics" as used in this work has a very extended meaning and it would not be sound to make this a ground for classifying the goods under consideration as "fabrics" when the general and usual understanding whether of trade and industry or of the common man is not in accordance with such use. It has been argued by the appellants that the Indian Standard Institution has published a Standard (No. 1S-2364-1979), dealing with conveyor beltings, and that this shows that they are recognised as a specific commodity in trade. We consider that there is substance in this argument. For the respondent, reliance has been placed on the definitions of "impregnated fabrics" and "industrial fabrics" contained in this Standard. Industrial fabrics as defined therein plainly do not cover the belting in question, since this term in the ISI apparently refers to fabrics which have not yet been coated, impregnated etc. The definition of impregnated fabrics mentions fabrics whose interstices in the yarn have been filled with chemical compound so as to cover the entire surface. It is also stated that these are commonly used for leather bags, garments, insultation tapes etc. The examples given are all of uses where the fabric retains the characteristics of cloth, namely of being flexible and relatively thin. Conveyor belting obviously cannot be considered as similar to the examples given and cannot therefore be included by analogy.
23. The learned Departmental Represntative had sought to distinguish of the present case from that of M/s International Conveyors Ltd. on the basis of the composition of the goods. We do not find that this makes any material difference so far as the present issue is concerned. We accept the argument of Shri Banerjee that the wording of Items 19 and 22 of the Central Excise Tariff is materially the same so far as the present issue is concerned. In regard to the composition, both in the case of International Conveyors and in the present case, the proportion of textile material was less than the proportion of plastic or other constituents. In the present case, the content of textile material was 43.3%, whereas that of plastic compound was 56.7%. It is not therefore possible to distinguish the present case from that of M/s International Conveyors on the basis of some difference in composition, 24. A point which was sought to be made by the learned Departmental Representative was that sub-item (3) of Item 22, which has been reproduced in para 19 above, refers to fabrics impregnated, coated or laminated with (plastic material). In fact his argument was to the effect that if a fabric once came into existence and was thereafter impregnated, coated or laminated with a plastic material, it should be deemed to fall within this sub-item, irrespective of the proportion of the plastic material or the nature of the final product. We do not find it possible to accept this argument. The wording of sub-item (3), as well as of the main item under which it appears, refers to "fabrics".
The fabrics may have been impregnated, coated or laminated with plastic material, but they must still be capable of being called "fabrics".
Impregnation, coating or lamination are all processes which upto a stage would leave the finished product still capable of being called a fabric. But when the proportion of plastic material reaches such a level that the final product does not retain the characteristics of a fabric, it would not, in our view, be proper or correct to treat this final product as an impregnated, coated or laminated fabric, merely because there is a fabric embedded inside it.
25. As already observed, there is hardly anything in the arguments placed before us on behalf of the respondent which was not advanced but rejected in the majority decision in the case of International Conveyors Ltd. We have nevertheless, for the reasons given earlier, considered it expedient to examine in detail the important arguments advanced. Having done so, we find no reason to take a different view from that which was taken by the Tribunal in two orders relating to International Conveyors Ltd. In other words, we consider that the goods in question in this case were properly classifiable under Item 68 of the Central Excise Tariff. We accordingly direct that the goods be re-classified under Item 68 and the duty payable, if any (after taking relevant exemptions into account) be calculated accordingly and the demand for duty made in the Collector's order be consequently withdrawn or reduced, as the case may be. We also, having regard to the circumstances of the case, and the fact that the appeal is substantially allowed, set aside the penalty of Rs. 5 lakhs imposed on the appellants.